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M&DC Purchasing & Supply Chain: Material Management



Production Activity Control



  • The time comes when plans must be put into action. Production activity control (PAC) is responsible for executing the master production schedule and the material requirements plan. At the same time, it must make good use of labor and machines, minimize work-in-process inventory, and maintain customer service.

  • The material requirements plan authorizes PAC:

    • To release work orders to the shop for manufacturing.

    • To take control of work orders and make sure they are completed on time.

    • To be responsible for the immediate detailed planning of the flow of orders through manufacturing, carrying out the plan, and controlling the work as it progresses to completion.

    • To manage day-to-day activity and provide the necessary support.

  • Figure 6.1 shows the relationship between the planning system and PAC. The activities of the PAC system can be classified into planning, implementation,
    and control functions.


a. Planning

  • The flow of work through each of the work centers must be planned to meet delivery dates, which means production activity control must do the following:

    • Ensure that the required materials, tooling, personnel, and information are available to manufacture the components when needed.

    • Schedule start and completion dates for each shop order at each work center so the scheduled completion date of the order can be met. This will involve the planner in developing a load profile for the work centers.

b. Implementation

  • Once the plans are made, production activity control must put them into action by advising the shop floor what must be done. Usually instructions are given by issuing a shop order. Production activity control will:

    • Gather the information needed by the shop floor to make the product.

    • Release orders to the shop floor as authorized by the material requirements plan. This is called dispatching.


c. Control

  • Once plans are made and shop orders released, the process must be monitored to learn what is actually happening. The results are compared to the plan to decide whether corrective action is necessary. Production activity control will do the following:

    • Rank the shop orders in desired priority sequence by work center and establish a dispatch list based on this information.

    • Track the actual performance of work orders and compare it to planned schedules. Where necessary, PAC must take corrective action by replanning, rescheduling, or adjusting capacity to meet final delivery requirements.

    • Monitor and control work-in-process, lead times, and work center queues.

    • Report work center efficiency, operation times, order quantities, and scrap.

  • The functions of planning, implementing, and controlling are shown schematically in Figure 6.2.

d. Manufacturing Systems

  • The particular type of production control system used varies from company to company, but all should perform the preceding functions. However, the relative importance of these functions will depend on the type of manufacturing process. Manufacturing processes can be conveniently broken down into three categories:

  1. Flow manufacturing.

  2. Intermittent manufacturing.

  3. Project manufacturing.

Flow manufacturing.

  • Flow manufacturing. Flow manufacturing is concerned with the production of high-volume standard products. If the units are discrete (e.g., cars and appliances), the process is usually called repetitive manufacturing, and if the goods are made in a continuous flow (e.g., gasoline), continuous manufacturing. There are four major characteristics to flow manufacturing:

    1. Routings are fixed, and work centers are arranged according to the routing. The time taken to perform work at one work center is almost the same as at any other work center in the line.

    2. Work centers are dedicated to producing a limited range of similar products. Machinery and tooling are especially designed to make the specific products.

    3. Material flows from one workstation to another using some form of mechanical transfer. There is little buildup in work-in-process inventory, and throughput times are low.

    4. Capacity is fixed by the line.

  • Production activity control concentrates on planning the flow of work and making sure that the right material is fed to the line as stated in the planned schedule. Since work flows from one workstation to another automatically, implementation and control are relatively simple.

Intermittent manufacturing.

  • Intermittent manufacturing is characterized by many variations in product design, process requirements, and order quantities. This kind of manufacturing is characterized by the following:

    1. Flow of work through the shop is varied and depends on the design of a particular product. As orders are processed, they will take more time at one workstation than at another. Thus, the work flow is not balanced.

    2. Machinery and workers must be flexible enough to do the variety of work. Machinery and work centers are usually grouped according to the function they perform (e.g., all lathes in one department).

    3. Throughput times are generally long. Scheduling work to arrive just when needed is difficult, the time taken by an order at each work center varies, and work queues before work centers, causing long delays in processing. Work-in-process inventory is often large.

    4. The capacity required depends on the particular mix of products being built and is difficult to predict.

  • Production activity control in intermittent manufacturing is complex. Because of the number of products made, the variety of routings, and scheduling problems, PAC is a major activity in this type of manufacturing. Planning and control are typically exercised using shop orders for each batch being produced. Our discussion of PAC assumes this kind of environment.

Project manufacturing.

  • Project manufacturing usually involves the creation of one or a small number of units. Large shipbuilding is an example. Because the design of a product is often carried out or modified as the project develops, there is close coordination between manufacturing, marketing, purchasing, and engineering.

  • To plan the processing of materials through manufacturing, PAC must have the following information:

    • What and how much to produce.

    • When parts are needed so the completion date can be met.

    • What operations are required to make the product and how long the operations will take.

    • What the available capacities of the various work centers are.

  • Production activity control must have a data or information system from which to work. Usually the data needed to answer these questions are organized into databases. The files contained in the databases are of two types: planning and control.

a. Planning Files

  • Four planning files are needed: item master file, product structure file, routing file, and work center master file.

Item master file.

  • There is one record in the item master tile for each part number. The file contains, in one place, all of the pertinent data related to the part. For PAC, this includes the following:

    • Part number, a unique number assigned to a component.

    • Part description.

    • Manufacturing lead time, the normal time needed to make this part.

    • Quantity on hand.

    • Quantity available.

    • Allocated quantity, quantities assigned to specific work orders but not yet withdrawn from inventory.

    • On-order quantities, the balance due on all outstanding orders.

    • Lot-size quantity, the quantity normally ordered at one time.

Product structure file (bill of material file).

  • The product structure tile (bill of material file) contains a list of the single-level components and quantities needed to assemble a parent. It forms a basis for a “pick list” to be used by storeroom personnel to collect the parts required to make the assembly.

Routing file.

  • The routing file contains a record for each part manufactured. The routing consists of a series of operations required to make the item. For each product, this file contains a step-by-step set of instructions describing how the product is made. It gives details of the following:

    • The operations required to make the product and the sequence in which those operations are performed.
      A brief description of each operation.

    • Equipment, tools, and accessories needed for each operation.

    • Setup times, the standard time required for setting up the equipment for each operation.

    • Run times, the standard time to process one unit through each operation.

    • Lead times for each operation.

Work center master file.

  • The work center master file collects all of the relevant data on a work center. For each work center, it gives details on the following:

    • Work center number.

    • Capacity.

    • Number of shifts worked per week.

    • Number of machine hours per shift.

    • Number of labor hours per shift.

    • Efficiency.

    • Utilization.

    • Queue time, the average time that a job waits at the work center before work is begun.

    • Alternate work centers, work centers that may be used as alternatives.

b. Control Files

  • Control in intermittent manufacturing is exercised through shop orders and control files that contain data on these orders. There are generally two kinds of files: the shop order master file and the shop order detail file.

Shop order master file

  • Each active manufacturing order has a record in the shop order master file. The purpose is to provide summarized data on each shop order such as the following information:

    • Shop order number, a unique number identifying the shop order.

    • Order quantity.

    • Quantity completed.

    • Quantity scrapped

    • 150 Chapter 6

    • Quantity of material issued to the order.

    • Due date, the date the order is expected to be finished.

    • Priority, a value used to rank the order in relation to others.

    • Balance due, the quantity not yet completed.

    • Cost information.

Shop order detail file.

  • Each shop order has a detail file that contains a record for each operation needed to make the item. Each record contains the following information:

    • Operation number.

    • Setup hours, planned and actual.

    • Run hours, planned and actual.

    • Quantity reported complete at that operation.

    • Quantity reported scrapped at that operation.

    • Due date or lead time remaining.

  • Once authorization to process an order has been received, production activity control is responsible for planning and preparing its release to the shop floor. The order should be reviewed to be sure that the necessary tooling, material, and capacity are available. If they are not, the order cannot be completed and should not be released.

  • Tooling is not generally considered in the material requirements planning (MRP) program, so at this stage, material availability must be checked. If MRP software is used, it will have checked the availability of material and allocated it to a shop order so no further checking is necessary. If MRP software is not used, production activity control must manually check material availability.

  • If a capacity requirements planning system has been used, necessary capacity should be available. However, at this stage, there may be some differences between planned capacity and what is actually available. When capacity requirements planning is not used, it is necessary to determine if capacity is available.

  • Checking capacity availability is a two-step process. First, the order must be scheduled to see when the capacity is needed, and second, the load on work centers must be checked in that period. Scheduling and loading are discussed in the next two sections.

  • The objective of scheduling is to meet delivery dates and to make the best use of manufacturing resources. It involves establishing start and finish dates for each operation required to complete an item. To develop a reliable schedule, the planner must have information on routing, required and available capacity, competing jobs, and manufacturing lead times (MLT) at each work center involved.

a. Manufacturing Lead Time

  • Manufacturing lead time is the time normally required to produce an item in a typical lot quantity. Typically, MLT consists of five elements:

    1. Queue time, amount of time the job is waiting at a work center before operation begins.

    2. Setup time, time required to prepare the work center for operation.

    3. Run time, time needed to run the order through the operation.

    4. Wait time, amount of time the job is at the work center before being moved to the next work center.

    5. Move time, transit time between work centers.

  • The total manufacturing lead time will be the sum of order preparation and release plus the MLTs for each operation. Figure 6.3 shows the elements making up manufacturing lead time. Setup time and run time are straightforward, and determining them is the responsibility of the industrial engineering department. Queue, wait, and move times are under the control of manufacturing and PAC.\

  • The largest of the five elements is queue time. Typically, in an intermittent manufacturing operation, it accounts for 85%—95% of the total lead time. Production activity control is responsible for managing the queue by regulating the flow of work into and out of work centers. If the number of orders waiting to be worked on (load) is reduced, so is the queue time, the lead time, and work-in-process. Increasing capacity also reduces queue. Production activity control must manage both the input of orders to the production process and the available capacity to control queue and work-in-process.

  • A term that is closely related to manufacturing lead time is cycle time. The ninth edition of the APICS Dictionary defines cycle time as the length of time from when material enters a production facility until it exits. A synonym is throughput time.


b. Example Problem

  • An order for 100 of a product is processed on work centers A and B. The setup time on A is 30 minutes, and run time is ten minutes per piece. The setup time on B is 50 minutes, and the run time is five minutes per piece. Wait time between the two operations is four hours. The move time between A and B is ten minutes. Wait time after operation B is four hours, and the move time into stores is 15 minutes. There is no queue at either workstation. Calculate the total manufacturing lead time for the order.


           Work Center A operation time =         30   + (100 x 10)      =       1030 minutes     

           Wait time                                                                    =          240 minutes

           Move time from A to B                                             =              10 minutes

           Work Center B operation time   =                    50 + (100 x 5)        = 550        minutes

           Wait time                                                                    =          240 minutes

           Move time from B to stores                                                 = 15         minutes

           Total manufacturing lead time                                         =       2085 minutes

                                                                                       =               34 hours, 45 minutes


c. Scheduling Techniques.

  • There are many techniques to schedule shop orders through a plant, but all of them require an understanding of forward and backward scheduling as well as finite and infinite loading.

  • Forward scheduling assumes that material procurement and operation scheduling for a component start when the order is received, whatever the due date, and that operations are scheduled forward from this date. The first line in Figure 6.4 illustrates this method. The result is completion before the due date, which usually results in a buildup of inventory. This method is used to decide the earliest delivery date for a product.
    Forward scheduling is used to calculate how long it will take to complete a task. The technique is used for purposes such as developing promise dates for customers or figuring out whether an order behind schedule can be caught up.

  • Backward scheduling is illustrated by the second line in Figure 6.4. The last operation on the routing is scheduled first and is scheduled for completion at the due date. Previous operations are scheduled back from the last operation. This schedules items to be available as needed and is the same logic as used in the MRP system. Work-in-process inventory is reduced, but because there is little slack time in the system, customer service may suffer.

  • Backward scheduling is used to determine when an order must be started. Backward scheduling is common in industry because it reduces inventory.

  • Infinite loading is also illustrated in Figure 6.4. The assumption is made that the workstations on which operations 1, 2, and 3 are done have capacity available when required. It does not consider the existence of other shop orders competing for capacity at these work centers. It assumes infinite capacity will be available. Figure 6.5 shows a load profile for infinite capacity. Notice the over and under load.

  • Finite loading assumes there is a defined limit to available capacity at any workstation. If there is not enough capacity available at a workstation because of other shop orders, the order has to be scheduled in a different time period. Figure 6.6 illustrates the condition.

  • In the forward-scheduling example shown in Figure 6.6, the first and second operations cannot be performed at their respective workstations when they should be because the required capacity is not available at the time required. These operations



  • must be rescheduled to a later time period. Similarly, in the example of scheduling back, the second and first operations cannot be performed when they should be and must be rescheduled to an earlier time period. Figure 6.7 shows a load profile for finite loading. Notice the load is smoothed so there is no overload condition.

  • Chapter 5 gives an example of backward scheduling as it relates to capacity requirements planning. The same process is used in PAC.

d. Example Problem

  • A company has an order for 50 brand X to be delivered on day 100. Draw a backward schedule based on the following:

  • Only one machine is assigned to each operation

  • The factory works one 8-hour shift five days a week

  • The parts move in one lot of 50.














Assembly X






e. Operation Overlapping

  • In operation overlapping, the next operation is allowed to begin before the entire lot is completed on the previous operation. This reduces the total manufacturing lead times because the second operation starts before the first operation finishes all the parts in the order. Figure 6.8 shows schematically how it works and the potential reduction in lead time.

  • An order is divided into at least two lots. When the first lot is completed on operation A, it is transferred to operation B. In Figure 6.8, it is assumed operation B cannot be set up until the first lot is received, but this is not always the case. While

  • operation A continues with the second lot, operation B starts on the first lot. When operation A finishes the second lot, it is transferred to operation B. If the lots are sized properly, there will be no idle time at operation B. The manufacturing lead time is reduced by the overlap time and the elimination of queue time.

  • Operation overlapping is a method of expediting an order, but there are some costs involved. First, move costs are increased, especially if the overlapped operations are not close together. Second, it may increase the queue and lead time for other orders. Third, it does not increase capacity but potentially reduces it if the second operation is idle waiting for parts from the first operation.

  • The problem is deciding the size of the sublot. If the run time per piece on operation B is shorter than that on A, the first batch must be large enough to avoid idle time on operation B.

f. Example Problem

  • Refer to the data given in the example problem in the section on manufacturing lead time. It is decided to overlap operations A and B by splitting the lot of 100 into two lots of 70 and 30. Wait time between A and B and between B and stores is eliminated. The move times remain the same. Setup on operation B cannot start until the first batch arrives. Calculate the manufacturing lead time. How much time has been saved?


Operation time for A for lot of 70




(70 x



730 minutes

Move time between A and B







10 minutes

Operation time for B for lot of 100




(100 x 5)


550 minutes

Move time from B to stores







15 minutes

Total manufacturing lead time







1305 minutes








21 hours, 45 minutes

Time saved = 2085 — 1305 =

780 minutes



13 hours


g. Operation Splitting

  • Operation splitting is a second method of reducing manufacturing lead time. The order is split into two or more lots and run on two or more machines simultaneously. If the lot is split in two, the run-time component of lead time is effectively cut in half, although an additional setup is incurred. Figure 6.9 shows a schematic of operation splitting.

  • Operation splitting is practical when:

  • Setup time is low compared to run time.

  • A suitable work center is idle.

  • It is possible for an operator to run more than one machine at a time.

  • The last condition often exists when a machine cycles through its operation automatically, leaving the operator time to set up another machine. The time needed to unload and load must be shorter than the run time per piece. For example, if the unload/load time was two minutes and the run time was three minutes, the operator would have time to unload and load the first machine while the second was running.

h. Example Problem

  • A component made on a particular work center has a setup time of 100 minutes and
    a run time of three minutes per piece. An order for 500 is to be processed on two machines simultaneously. The machines can be set up at the same time. Calculate the elapsed operation time.


Elapsed operation time 100 + 3 X 250 = 850 minutes

                                                                         = 14 hours and 10 minutes

5. Load Leveling

  • Load profiles were discussed in Chapter 5 in the section on capacity requirements planning. The load profile for a work center is constructed by calculating the standard hours of operation for each order in each time period and adding them together by time period. Figure 6.10 is an example of a load report.

  • This report tells PAC what the load is on the work center. There is a capacity shortage in week 20 of 30 hours. This means there was no point in releasing all of the planned orders that week. Perhaps some could be released in week 18 or 19, and perhaps some overtime could be worked to help reduce the capacity crunch.

Work Center: 10                        Available Time: 120 hours/week

Description: Lathes                    Efficiency: 115%

Number of Machines: 3              Utilization 80%

Rated Capacity:

110 standard hours/week









Released Load








Planned Load








Total Load








Rated Capacity








(Over)/Under Capacity








Figure 6.10 Work center load report.

  • In intermittent manufacturing, it is almost impossible to balance the available capacities of the various workstations with the demand for their capacity. As a result, some workstations are overloaded and some underloaded. The overloaded workstations are called bottlenecks and, by definition, are those workstations where the required capacity is greater than the available capacity. In the ninth edition of their dictionary, APICS defines a bottleneck as “a facility, function, department, or resource whose capacity is equal to or less than the demand placed upon it.”

  • Throughput. Throughput is the total volume of production passing through a facility. Bottlenecks control the throughput of all products processed by them. If work centers feeding bottlenecks produce more than the bottleneck can process, excess work-in-process inventory is built up. Therefore, work should be scheduled through the bottleneck at the rate it can process the work. Work centers fed by bottlenecks have their throughput controlled by the bottleneck, and their schedules should be determined by that of the bottleneck.

a. Example Problem

  • Suppose a manufacturer makes wagons composed of a box body, a handle assembly, and two wheel assemblies. Demand for the wagons is 500 a week. The wheel assembly capacity is 1200 sets a week, the handle assembly capacity is 450 a week, and final assembly can produce 550 wagons a week.

  1. What is the capacity of the factory?

  2. What limits the throughput of the factory?

  3. How many wheel assemblies should be made each week?

  4. What is the utilization of the wheel assembly operation?

  5. What happens if the wheel assembly utilization is increased to 100%?


  1. 450 units a week.

  2. Throughput is limited by the capacity of the handle assembly operation.

  3. 900 wheel assemblies should be made each week. This matches the capacity of the handle assembly operation.

  4. Utilization of the wheel assembly operation is 900 ± 1200 75%.

  5. Excess inventory builds up.

b. Example Problem

  • A work center is to process 150 units of gear shaft SG 123 on work order 333. The setup time is 1.5 hours, and the run time is 0.2 hours per piece. What is the standard time needed to run the order?


        Total standard time = setup time + run time
                                                             = 1.5 + (150 x 0.2)
                                                             = 31.5 standard hours


c. Some bottleneck principles.

  • Since bottlenecks control the throughput of a facility, some important principles should be noted:

    1. Utilization of a non-bottleneck resource is not determined by its potential, but by another constraint in the system. In the previous example problem, the utilization of the wheel assembly operation was determined by the handle assembly operation.

    2. Using a non-bottleneck 100% of the time does not produce 100% utilization. lf the wheel assembly operation was utilized 100% of the time, it would produce 1200 sets of wheels a week, 300 sets more than needed. Because of the buildup of inventory, this operation would eventually have to stop.

    3. The capacity of the system depends on the capacity of the bottleneck. If the handle assembly operation breaks down, the throughput of the factory is reduced.

    4. Time saved at a non-bottleneck saves the system nothing. Suppose, in a flash of brilliance, the industrial engineering department increased the capacity of the wheel assembly operation to 1500 units a week. This extra capacity could not be utilized, and nothing would be gained.

    5. Capacity and priority must be considered together. Suppose the wagon manufacturer made wagons with two styles of handles. During setup, nothing is produced, which reduces the capacity of the system. Since handle assembly is the bottleneck, every setup in this operation reduces the throughput of the system. Ideally, the company would run one style of handle for six months, then switch over to the second style. However, customers wanting the second style of handle might not be willing to wait six months. A compromise is needed whereby runs are as long as possible but priority (demand) is satisfied.

    6. Loads can, and should, be split. Suppose the handle assembly operation (the bottleneck) produces one style of handle for two weeks, then switches to the second style. The batch size is 900 handles. Rather than waiting until the 900 are produced before moving them to the final assembly area, the manufacturer can move a day’s production (90) at a time. The process batch size and the transfer batch size are different. Thus, delivery to the final assembly is matched to usage, and work-in-process inventory is reduced.

    7. Focus should be on balancing the flow through the shop. The key is throughput that ends up in sales

d. Managing bottlenecks.

  • Since bottlenecks are so important to the throughput of a system, scheduling and controlling them is extremely important. The following must be done:

  1. Establish a time buffer before each bottleneck. A time buffer is an inventory (queue) place before each bottleneck. Because it is of the utmost importance to keep the bottleneck working, it must never be starved for material, and it can be starved only if the flow from feeding workstations is disrupted. The time buffer should be only as long as the time of any expected delay caused by feeding workstations. In this way, the time buffer ensures that the bottleneck will not be shut down for lack of work and this queue will be held at a predetermined minimum quantity.

  2. Control the rate of material feeding the bottleneck. A bottleneck must be fed at a rate equal to its capacity so the time buffer remains constant. The first operation in the sequence of operations is called a gate operation. This operation controls the work feeding the bottleneck and must operate at a rate equal to the output of the bottleneck so the time buffer queue is maintained.

  3. Do everything to provide the needed bottleneck capacity. Anything that increases the capacity of the bottleneck increases the capacity of the system. Better uti­lization, fewer setups, and improved methods to reduce setup and run time are some methods for increasing capacity.

  4. Adjust loads. This is similar to item 3 but puts emphasis on reducing the load on a bottleneck by using such things as using alternate work centers and subcon­tracting. These may be more costly than using the bottleneck, but utilization of non-bottlenecks and throughput of the total system is increased, resulting in more company sales and increased profits.

  5. 5.  Change the schedule. Do this as a final resort, but it is better to be honest about delivery promises.

  • Once the bottleneck is scheduled according to its available capacity and the market demand it must satisfy, the non-bottleneck resources can be scheduled. When a work order is completed at the bottleneck, it can be scheduled on subse­quent operations.

  • Feeding operations have to protect the time buffer by scheduling backward in time from the bottleneck. If the time buffer is set at four days, the operation immediately pre­ceding the bottleneck is scheduled to complete the required parts four days before they are scheduled to run on the bottleneck. Each preceding operation can be hack-scheduled in the same way so the parts are available as required for the next operation.

  • Any disturbances in the feeding operations are absorbed by the time buffer, and throughput is not affected. Also, work-in-process inventory is reduced. Since the queue is limited to the time buffer, lead times are reduced.

  • The previous section “Scheduling Bottlenecks” was developed by Eliyahu M. Goldratt in his Theory of Constraints. It has allowed many people to rethink their approaches to improving and managing their production processes. The fundamental concept behind the work is that every operation producing a product or service is a series of linked processes. Each process has a specific capacity to produce the given defined output for the operation, and that in virtually every case, there is one process that limits or constrains the throughput from the entire operation. Refer to Figure 6.11 for an example of an operation producing product A.

  • The total operation is constrained by process 3 at 4 per hour. No matter how much efficiency there is in the other processes and how many process improvements are made in processes 1, 2, and 4, it will never be possible to exceed the overall operational output of 4 per hour. Increased efficiency and utilization in processes 1 and 2 will only increase inventory—not sales.

a. Manage the Constraint

  • Several fundamental guidelines have been developed for understanding how to manage a constraining process or bottleneck. Some of the more noteworthy include focusing on balancing the flow through the shop, time lost at a bottleneck is time lost to the whole system but time lost at a nonconstraint is a mirage, and transfer batches do not have to be the same size as process batches. All of these were discussed in the previous section “Some Bottleneck Principles.”

b. Improve the Process

  • Once a constraint has been identified, there is a five-step process that is recommended to help improve the performance of the operation. The five steps are summarized as follows:

    1. Identify the constraint. This implies the need to examine the entire process to determine which process limits the throughput. The concept does not limit this process examination to merely the operational processes. For example, in

Figure 6.11, suppose the sales department was only selling the output at the rate of 3 per hour. In that case, sales would be the constraint and not process 3. It must be remembered that a constraint limits throughput, not inventory or production.

  1. Exploit the constraint. Find methods to maximize the utilization of the constraint toward productive throughput. For example, in many operations all processes are shut down during lunchtime. If a process is a constraint, the operation should consider rotating lunch periods so that the constraint is never allowed to be idle.

  2. Subordinate everything to the constraint. Effective utilization of the constraint is the most important issue. Everything else is secondary.

  3. Elevate the constraint. This means to find ways to increase the available hours of the constraint, including more of it.

  4. Once the constraint is a constraint no longer find the new one and repeat the steps. As the effective utilization of the constraint increases, it may cease to be a constraint as another process becomes one. In that case the emphasis shifts to the new process constraint.

c. Scheduling with the Theory of Constraints

  • Even the scheduling system developed for the Theory of Constraints has its own specific approach. It is often described as Drum-Buffer-Rope:

  • Drum. The drum of the system refers to the “drumbeat” or pace of production. It represents the master schedule for the operation, which is focused around the pace of throughput as defined by the constraint.

  • Buffer. Since it is so important that the constraint never be “starved” for needed inventory, a “time” buffer is often established in front of the constraint. It is called a time buffer because it represents the amount of time that the inventory in the buffer protects the constraint from disruptions.

  • Rope. The analogy is that the rope “puils” production to the constraint for necessary processing. While this may imply a Kanban-type pull system, it can be done by a well-coordinated release of material into the system at the right time.

  • Even the scheduling system has its primary focus on effective management of the organization’s constraint to throughput and sales.

b. Example Problem

  • Parent X requires one each of component Y and Z. Both Y and Z are processed on work center 20 which has an available capacity of 40 hours. The setup time for component Y is one hour and the run time 0.3 hours per piece. For component Z, setup time is two hours and the run time is 0.20 hours per piece. Calculate the number of Ys and Zs that can be produced.


                  Available capacity for Ys and Zs = 40 hours

                   Letx = number of Ys and Zs to produce

                   Time~ + Timex = 40 hours

                   1 + 0.3x+ 2+0.2x=40hours

                    0.5x = 37 hours

                    X = 74

Therefore, work center 20 can produce 74 Ys and 74 Zs.



  • Orders that have tooling, material, and capacity have a good chance of being completed on time and can be released to the shop floor. Other orders that do not have all of the necessary elements should not be released because they only cause excess work-in-process inventory and may interrupt work on orders that can be completed. The process for releasing an order is shown in Figure 6.12.

  • Implementation is arrived at by issuing a shop order to manufacturing authorizing them to proceed with making the item. A shop packet is usually compiled which contains the shop order and whatever other information is needed by manufacturing. It may include any of the following:

    • Shop order showing the shop order number, the part number, name, description, and quantity.

    • Engineering drawings.

    • Bills of material.

    • Route sheets showing the operations to be performed, equipment and accessories needed, materials to use, and the setup and run times.

    • Material issue tickets that authorize manufacturing to get the required material from stores. These are also used for charging the material against the shop order.

    • Tool requisitions authorizing manufacturing to withdraw necessary tooling from the tool crib.

    • Job tickets for each operation to be performed. As well as authorizing the individual operations to be performed, they also can function as part of a reporting system. The worker can log on and off the job using the job ticket, and it then becomes a record of that operation.

    • Move tickets that authorize and direct the movement of work between operations.


9. Control

  • Once work orders have been issued to manufacturing, their progress has to be controlled. To control progress, performance has to be measured and compared to what is planned. If what is actually happening (what is measured) varies significantly from what was planned, either the plans have to be changed or corrective action must be taken to bring performance back to plan.

  • The objectives of production activity control are to meet delivery dates and to make the best use of company resources. To meet delivery dates, a company must control the progress of orders on the shop floor, which means controlling the lead time for orders. As discussed earlier in this chapter, the largest component of lead time is queue. If queue can be controlled, delivery dates can be met. Chapter 1 discussed some characteristics of intermittent operations in which many different products and order quantities have many different routings, each requiring different capacities. in this environment, it is almost impossible to balance the load over all the workstations. Queue exists because of this erratic input and output.

  • To control queue and meet delivery commitments, production activity control must:

  • Control the work going into and coming out of a work center. This is generally called input/output control.

  • Set the correct priority of orders to run at each work center.

a. Input/Output Control

  • Production activity control must balance the flow of work to and from different work centers. This is to ensure queue, work-in-process, and lead times are controlled. The input/output control system is a method of managing queues and work-in-process lead times by monitoring and controlling the input to, and output from, a facility. It is designed to balance the input rate in hours with the output rate so these will be controlled.

  • The input rate is controlled by the release of orders to the shop floor. If the rate of input is increased, queue, work-in-process, and lead times increase. The output rate is controlled by increasing or decreasing the capacity of a work center. Capacity change is a problem for manufacturing, but it can be attained by overtime or under-time, shifting workers, and so forth. Figure 6.13 shows the idea graphically.

Input/output report.

  • To control input and output, a plan must be devised, along with a method for comparing what actually occurs against what was planned. This in-formation is shown on an input/output report. Figure 6.14 is an example of such a report. The values are in standard hours.


Work Center: 201

Capacity per Period: 40 standard hours









Planned Input







Actual Input







Cumulative Variance








Planned Input







Actual Input







Cumulative Variance








Planned Backlog







Actual Backlog







Figure 6.14 Input/output report.

Cumulative variance

  • Cumulative variance is the difference between the total planned for a given pe¬riod and the actual total for that period. It is calculated as follows:

Cumulative variance = previous cumulative variance + actual — planned

Cumulative input variance week 2 = —4 + 32 — 32 = —4

  • Backlog is the same as queue and expresses the work to be done in hours. It is calculated as follows:

Planned backlog for period 1 = previous backlog + planned input — planned output

                                          = 32 + 38 — 40

                                          = 30 hours

  • The report shows the plan was to maintain a level output in each period and to reduce the queue and lead time by ten hours, but input and output were lower than expected.

  • Planned and actual inputs monitor the flow of work coming to the work center. Planned and actual outputs monitor the performance of the work center. Planned and actual backlogs monitor the queue and lead time performance.

b. Example Problem

  • Complete the following input/output report for weeks 1 and 2.




Planned Input



Actual Input



Cumulative Variance



Planned Output



Actual Output



Cumulative Variance



Planned Backlog




Actual Backlog






Cumulative input variance week 1 = 42 — 45 = —3

Cumulative input variance week 2 = —3 + 46 — 40 = 3

Cumulative output variance week 1 = 42 — 40 = 2

Cumulative output variance week 2 = 2 + 44 — 40 6

Planned backlog week 1 = 30 + 45 — 40 = 35

Planned backlog week 2 = 35 + 40 — 40 = 35

Actual backlog week 1 = 30 + 42 — 42 = 30

Actual backlog week 2 = 30 + 46 — 44 = 32

c. Operation Sequencing

  • The ninth edition of the APICS Dictionary defines operation sequencing as a technique for short-term planning of actual jobs to be run in each work center based on capacity and priorities. Priority, in this case, is the sequence in which jobs at a work center should he worked on.

  • The material requirements plan establishes proper need dates and quantities. Over time, these dates and quantities change for a variety of reasons. Customers may require different delivery quantities or dates. Deliveries of component parts, either from vendors or internally, may not be met. Scrap, shortages, and overages may occur, and so on. Control of priorities is exercised through dispatching.


  • Dispatching is the function of selecting and sequencing available jobs to be run at individual work centers. The dispatch list is the instrument of priority control. It is a listing by operation of all the jobs available to be run at a work center with the job listed in priority sequence. It normally includes the following information and is updated and published at least daily:

    • Plant, department, and work center.

    • Part number, shop order number, operation number, and operation description of jobs at the work center.

    • Standard hours.

    • Priority information.

    • Jobs coming to the work center.

    Figure 6.15 is an example of a daily dispatch list.

Dispatching rules.

  • The ranking of jobs for the dispatch list is created through the application of priority rules. There are many rules, some attempting to reduce work-in-process inventory, others attempting to minimize the number of late orders or maximize


Work Center: 10

Rated Capacity: 16 standard hours per day

Shop Date: 250

          Order        Part        Order      Setup Run           Total     Quantity          Load     Operation Dates

Number Number Quantity Hours Hours Hours Completed Remaining Start Finish

           123        6554         100         1.5        15       16.5          75                3.75         249        250

           121        7345           50         0.5        30       30.5          10                24            249        251

           142        2687         500         0.2        75       75.2            0                75            250        259

                                             Total Available Load in Standard Hours          102.75


Jobs Coming

           145        7745         200         0.7        20       20.7            0              20.7           251        253

           135        2832           20         1.2          1.0      2.7            0                2.7           253        254

                                               Total Future Load in Standard Hours         23.4


Figure 6.15 Dispatch list (based on 2 machines working one 8-hour shift per day

  • the output of the work center. None is perfect or will satisfy all objectives. Some commonly used rules are:

    • First come, first served (FCFS). Jobs are performed in the sequence in which they are received. This rule ignores due dates and processing time.

    • Earliest job due date (EDD). Jobs are performed according to their due dates. Due dates are considered, but processing time is not.

    • Earliest operation due date (ODD). Jobs are performed according to their operation due dates. Due dates and processing time are taken into account. As well, the operation due date is easily understood on the shop floor.

    • Shortest process time (SPT). Jobs are sequenced according to their process time. This rule ignores due dates, but it maximizes the number of jobs processed. Orders with long process times tend to be delayed.

  • Figure 6.16 illustrates how these sequencing rules work. Notice that each rule usually produces a different sequence.

  • One other rule that should be mentioned is called critical ratio (CR). This is an index of the relative priority of an order to other orders at a work center. It is based on the ratio of time remaining to work remaining and is usually expressed as:

                    Due date - present               date - actual time remaining

     CR =                                        .   =                                                   .

                    Lead time remaining                    lead time remaining

  •  Lead time remaining includes all elements of manufacturing lead time and expresses the amount of time the job normally takes to completion.
    If the actual time remaining is less than the lead time remaining, it implies there is not sufficient time to complete the job and the job is behind schedule. Similarly, if lead time remaining and actual time remaining are the same, the job is on schedule. If the actual time remaining is greater than the lead time remaining,






Sequencing Rule

Time (days)



Due Date














































Figure 6.16 Application of sequencing rules.

  • the job is ahead of schedule. If the actual time remaining is less than one, the job is late already. The following table summarizes these facts and relates them to the critical ratio:

CR less than I (actual time less than lead time). Order is behind schedule.

CR equal to I (actual time equal to lead time). Order is on schedule.

CR greater than 1 (actual time greater than lead time). Order is ahead of schedule.

CR zero or less (today’s date greater than due date). Order is already late.

  • Thus, orders are listed in order of their critical ratio with the lowest one first. Critical ratio considers due dates and process time. However, it is not easily understood.

d. Example Problem

  • Today’s date is 175. Orders A, B, and C have the following due dates and lead time remaining. Calculate the actual time remaining and the critical ratio for each.

                                                                  Lead Time

                                             Order         Due Date Remaining (days)

 A               185                       20

 B               195                       20

   C               205                       20


  • Order A has a due date of 185, and today is day 175. There are 10 actual days remaining. Since the lead time remaining is 20 days,


                                                 Critical ratio =              = 0.5



  •  Similarly, the actual time remaining and the critical ratios are calculated for orders B and C. The following table gives the results:

        Lead Time              Actual Time

            Order         Due Date Remaining (days)       Remaining (days)                 CR

               A               185                         20                              10                   0.5

               B               195                         20                              20                   1.0

                C                  205                      20                              30                   1.5

  • Order A has less actual time remaining than lead time remaining, so the CR is less than 1. It is, therefore, behind schedule. Order B has a CR of 1 and is exactly on schedule. Order C has a CR of 1.5—greater than 1—and is ahead of schedule.

  • Dispatching rules should be simple to use and easy to understand. As shown in the preceding example, each rule produces a different sequence and has its own advantages and disadvantages. Whichever rule is selected should be consistent with the objectives of the planning system.

e. Production Reporting

  • Production reporting provides feedback of what is actually happening on the plant floor. It allows PAC to maintain valid records of on-hand and on-order balances, job status, shortages, scrap, material shortages, and so on. Production activity control needs this information to establish proper priorities and to answer questions regarding deliveries, shortages, and the status of orders. Manufacturing management needs this information to make decisions about plant operation. Payroll needs this information to calculate employees’ pay.

  • Data must be collected, sorted, and reported. The particular data collected depend upon the needs of the various departments. The methods of data collection vary. Sometimes the operator reports the start and completion of an operation, order, movement, and so on, using an on-line system directly reporting events as they occur via data terminals. In other cases, the operator, supervisor, or timekeeper reports this information on an operation reporting form included in the shop packet. Information about inventory withdrawals and receipts must be reported as well.

    • Once the data are collected, they must be sorted, and appropriate reports produced. Types of information needed for the various reports include:

    • Order status.

    • Weekly input/output by department or work center.

    • Exception reports on such things as scrap, rework, and late shop orders.

    • Inventory status.

    • Performance summaries on order status, work center and department efficiencies, and so on